A surge in the number of borrowers looking to refinance their mortgages in May, after the Reserve Bank cut the cash rate to 2%, saw a major aggregator have another record-breaking month.
AFG processed a total of $5,017 million during May – an increase of 18.9% on May 2014, and of 14.5% on April 2015. This is the second month this year that AFG has broken through the $5 billion barrier – the first being in March.
AFG’s Mortgage Index also reveals that the proportion of loans processed for investors is softening. Investment loans moderated from 43.1% of all borrowers in April to 40.9% in May, in an early indication the APRA driven lender policy and pricing changes may be starting to have an effect.
Meanwhile, the proportion of existing borrowers arranging new home loans comprised 38.2% of all loans, compared to 33.9% in April. The average proportion of refinancers for the 12 months leading up to May was 35%.
Fixed home loans spiked from 13.6% in April to 15.2% of all loans processed in May as more borrowers chose to fix the rate on all or part of their loans.
“Interest-rate cuts, like the one we had in [May], not only encourage new borrowers – but also prompt existing borrowers to review their arrangements. After the [May] rate cut, it appears many borrowers came to the view that we are at, or very close to, the bottom of the interest rate cycle,” Brett McKeon, managing director of AFG said.
The attractive owner occupier offers available from lenders, along with the changes that are occurring in the investment market, make it a very busy time for brokers.
Non-major lenders fought back to recover some of the ground they lost to major lenders during the first four months of the year, increasing their combined share from 25.3% in April to 28.1% in May.